-- Rep. Warren Kampf (R-Montgomery/Chester) has announced that he will reintroduce legislation to reform the state’s two underfunded pension systems.
One part of the legislation would create a mandatory Defined Contribution (DC) plan for all future state employees. Another part would create a mandatory DC plan for all future school district employees.
The new DC plans would include a 4 percent employer match and a mandatory employee contribution.
“These are the types of retirement plans the vast majority of our constituents have in their own lives,” Kampf said. “These are plans that businesses across our country use in their budgets to avoid financial obligations that cannot be planned. We are simply asking public employees to follow the same plans used by those in the private sector as a way to stop the growing havoc public pension systems have created for taxpayers all across the country.”
Pennsylvania has two public pension systems. The Public School Employees’ Retirement System (PSERS) provides retirement benefits for public school teachers and other workers in the public education system. The State Employees’ Retirement System (SERS) provides pensions for state workers, legislators, judges and others who work for the Commonwealth.
Both pension plans are known as defined benefit systems, where retirees are guaranteed a certain benefit calculated based on their years of service, average final pay and a “multiplier.” By comparison, most private-sector employers provide what is known as a defined contribution retirement plan, such as a 401(k), where the worker and employer both contribute to the plan and the worker’s benefits are determined based on investment returns.
The combined unfunded liability of the two systems is more than $50 billion. The increased contributions needed to pay down the liability each year is a colossal problem for the state and school district budgets.
“We must act now,” Kampf said. “Our public pension crisis only deepens as the days go by.”
Representative Warren Kampf
Pennsylvania House of Representatives
Media Contact: David Foster